Publication 334 |
2001 Tax Year |
Items To Check
Consider the following items before figuring your gross profit.
Gross receipts.
At the end of each business day, make sure your records balance
with your actual cash and credit receipts for the day. You may find it
helpful to use cash registers to keep track of receipts. You should
also use a proper invoicing system and keep a separate bank account
for your business.
Sales tax collected.
Check to make sure your records show the correct sales tax
collected.
Inventory at beginning of year.
Compare this figure with last year's ending inventory. The two
amounts should usually be the same.
Purchases.
If you take any inventory items for your personal use -- use
them yourself, provide them to your family, or give them as personal
gifts, etc. -- be sure to remove them from the cost of goods
sold. For details on how to adjust cost of goods sold, see
Merchandise withdrawn from sale in chapter 6.
Inventory at end of year.
Check to make sure your procedures for taking inventory are
adequate. These procedures should ensure all items have been included
in inventory and proper pricing techniques have been used.
Use inventory forms and adding machine tapes as the only evidence
for your inventory. Inventory forms are available at office supply
stores. These forms have columns for recording the description,
quantity, unit price, and value of each inventory item. Each page has
space to record who made the physical count, who priced the items, who
made the extensions, and who proofread the calculations. These forms
will help satisfy you that the total inventory is accurate. They will
also provide you with a permanent record to support its validity.
Inventories are discussed in chapter 2.
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